The Confused Economist on Patent Reform

A recent Economist article, Apple v Samsung: iPhone, uCopy, iSue (“Not every innovation deserves a patent. Not every copycat deserves a punishment”) exemplifies today’s widespread unprincipled approach to policy. Few people want to abolish IP, even though they can find no good arguments for it and can see only damage. They only want to “reform” it. The Economist buys into the romanticized propaganda in favor of the patent system:

It is useful to recall why patents exist. The system was established as a trade-off that provides a public benefit: the state agrees to grant a limited monopoly to an inventor in return for disclosing how the technology works. To qualify, an innovation must be novel, useful and non-obvious, which earns the inventor 20 years of exclusivity.

But there is no evidence that there is a “public benefit” (see Boldrin and Levine: The Case Against Patents). Ah, wel, who cares? We can’t be “extreme” now, can we?

Then the “newspaper” (i.e., magazine) recognizes the problems of patents:

A proliferation of patents harms the public in three ways. First, it means that technology companies will compete more at the courtroom than in the marketplace—precisely what seems to be happening. Second, it hampers follow-on improvements by firms that implement an existing technology but build upon it as well. Third, it fuels many of the American patent system’s broader problems, such as patent trolls (speculative lawsuits by patent-holders who have no intention of actually making anything); defensive patenting (acquiring patents mainly to pre-empt the risk of litigation, which raises business costs); and “innovation gridlock” (the difficulty of combining multiple technologies to create a single new product because too many small patents are spread among too many players).

So: there are obvious costs and harms of the patent system. And no apparent benefits. Yet we should not abolish this abomination; we should “reform” it:

Some basic reforms would alleviate many of the problems exemplified by the iPhone lawsuit. The existing criteria for a patent should be applied with greater vigour. Specialised courts for patent disputes should be established, with technically minded judges in charge: the inflated patent-damage awards of recent years are largely the result of jury trials. And if patents are infringed, judges should favour monetary penalties over injunctions that ban the sale of offending products and thereby reduce consumer choice.

They conclude:

A world of fewer but more robust patents, combined with a more efficient method of settling disputes, would not just serve the interests of the public but also help innovators like Apple.

The assumption here is that if we get rid of the “bad” patents, the “junk” patents, and patent trolls, and software patents, etc, and somehow make the “system” more “just” and “serve the interests” of the “public” and “innovators”—like Apple, ha!—then all would be better. They do not realize that even if you get rid of patent trolls, “low quality” patents, and have only “robust” patents left: this is still anti-competitive and anti-free market. It still allows “robust” patent owners to use these state-granted patent monopolies to squelch competition, reduce innovation, increase prices to consumers. We do not want to reform the patent system so that we only have “high quality” or “robust” patents left; robust patents are the problem, just like an efficient and effective DEA or IRS is a bad thing, not a good thing.